Well, the only experience I have with it was a hosting provider doing it for us, so it's peripheral. I can tell you the databases continued to function normally, except for one niggling annoyance: External containers with active content suddenly stopped functioning. I had to recode the database (quickly) to download and display the contents on the client machine to compensate.
Don't have any idea if that's a bug in the 12.0.4 release or if the provider did something funky, though.
It does not remove IIS at all, it will redeploy the hooks it has into IIS but nothing else.
As to the reboot: that's always a good idea to do even after a regular updater. In this case, make sure to reboot after the uninstall and after the v4 install.
I've done a few of these without any issues.
Thanks for the feedback Mike & Wim. Planning this over the weekend.